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Top 5 Rookie Mistakes New Entrepreneurs Make on Warehousing & Distribution

Starting any new business can be a daunting project, and setting up a new distribution center or warehouse where hundreds of different companies count on your efficiency can be downright overwhelming. As with any new business, you’re going to be purchasing equipment to outfit your operation and make it as efficient & profitable as possible. Many new entrepreneurs start this process from scratch and learn as they go. Today, you can’t afford to do on-the-job learning. You need to be on your “A-Game” from the start.

The following 5 tips (written by a 30 year industry professional) will help you avoid the most common pitfalls and mistakes that rookie entrepreneurs make that can bankrupt their business before it even gets off the ground.

1: Are you really using ALL of your available space?

Warehouse SpaceMost newcomers to warehousing are familiar with storage racking and how it works. It’s really not rocket science, afterall. However, if you don’t think about the space above your head, you can end up wasting a lot of very prime storage space and spending more on inefficient storage and retrieval practices.

Take, for example, the picture to the left. That 20 or so feet above the worker’s head could easily have been filled with additional storage just by purchasing higher upright frames, and a few more beams. Instead, the owner of this warehouse has spread his storage across almost double the floor space he actually needs.

In addition to the money lost by inefficient storage & retrieval practices, you’ve got much more airspace to heat or cool. This is one of the most overlooked yet easily preventable money wasters that I see happening all the time.

2: The application, not available space should determine rack placement.

Often, you may think you should place your storage rack in an area that is not currently being used, rather than an area best suited for storage. An example would be a company that places its racks along an unused wall instead of in an area that allows for strategic flow of resources to and from workstations.

Another counter-intuitive piece of advice is that close proximity to the point-of-use may not be the best solution, either. One company that we analyzed had stored their welding parts directly above their welding workstations. True, the parts were close to the place where they were needed, however anytime someone needed to access them, they had to stop work to move machines & other materials out of the way. After consulting with this company, we created a solution where the material is stored in another area and when needed, the materials are put into a tote and sent to the proper workstation via an automatic conveyor line. Now, the parts are brought to the welders automatically and they only have to contend with the parts they need.

3: Do you really need new equipment?

Typically when we speak to professionals looking for material handling equipment, they are amazed that they don’t really need to buy new equipment to accomplish their business goals. What usually happens when a newbie first shops for their material handling equipment, they are told by suppliers that they must buy new equipment because all used equipment is just junk. This is the equivalent of saying that all used cars are just junk. While it may be true that there are a lot of lemons out there, there is also some very prime used equipment that can be had for as little as fifty cents on the dollar.

To give you a very relevant example, we recently assisted a client who was just getting started setting up his warehouse. The first piece of equipment he went out and bought was a brand new forklift. It was a name-brand rig – pristine – only 2 hours on the engine and not a scratch on it. While it was arguably a nice machine, it turns out that the customer found us because he had been shopping for cheap pallet racking because he spent almost half of his budget on a forklift truck that he was only going to use for a few hours every day. When he learned that we also have several used & reconditioned forklifts available you could almost see the smoke coming out of his ears he was so angry.

4: Can you really afford used equipment?

Okay, okay…I know – I just finished extolling the benefits of used equipment, and now I’m telling you to beware. Here’s the straight story. While you can usually always save money when buying used equipment, it’s not always the right choice. The part where things get tricky is knowing when to buy used & when to buy new.

In the example I gave you above, it’s pretty clear that the client should have bought the used forklift so he would have had more money to budget for the rest of his expenses. But while a used forklift is the easy choice, it’s not so clear when you get into more complex systems. For example, if I were to buy a carousel or conveyor system, I would try to save money on the equipment by purchasing used, but I would never skimp on the controls or programming systems. With the right software system, I will be able to squeeze additional efficiency out of a system that the software from five years ago would not have afforded.

I’ll say it again, make sure you weigh all the benefits of used vs. new. Knowing when to buy used or new equipment is a skill that will take you several years to hone, however you can usually make the safe assumption that the more complexity built into a system, the better off you are purchasing it new.

5: When it comes to packaging, simplicity is key.

Cardboard BoxOne of the last stages of product development involves choosing a package for your product. It’s usually at this point where the designers you hire try to convince you that you want very flashy, large or bulky packaging so customers will see your product stand out on the shelves. While they make a good argument, you also have to be aware of excessive packaging which can lead to decreased efficiency when handling & shipping the product.

Take a look at your packaging. Is there any room for improvement? Can you shave an extra few ounces or inches off of the container? Is there a better way to ship it so it wont get damaged? Have you checked to see if the freight carrier will offer any discounts if you change the size, weight or shape of the package? These are the questions you need to address to ensure you’re really packaging and shipping your product as efficiently as possible.

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